Sri Lanka’s poor will benefit from more economic freedom

Sri Lanka’s poor stands to gain big benefits if more economic freedoms are given, while the businesses and foreign investors will also be encouraged, the participants of the Economic Freedom Summit by Advocata Institute, a free market think tank, said.

To understand what economic freedom really means, one has to consider what happens when such liberties are taken away with controls and restrictions, Rohan Samarajiva, Head of LirneAsia, a regional policy research body, said.

Economic freedom - Unknown ideal
The 1970s’ closed economy era was a classic example, he said.
“During that time, the government decided what we ate,” Samarajiva told an economic freedom summit organised by Advocata Institute and Fraser Institute of Canada, which compiles a global index of economic freedom. 

“We went to the co-operative shop and if they had ‘harlmasso’ (dried sprats), we ate ‘harlmasso’. If they had ‘karawala’ (dried fish) that week, we had ‘karawala’ for our meal,” Samarajiva said speaking in Sinhalese. 

“If for the New Year the government allowed sardine (tinned fish) into the country, we had sardines.” 
If some rice was taken in a car or other vehicle against the rules set by the state, it was considered a ‘crime’ and was confiscated by the police at a roadblock called ‘harl pol-ler’ (rice barrier). If chilli was transported, it was caught at a ‘miris pol-ler’ (chilli barrier).

Malnutrition and unemployed rose during the period.
Sirimal Abeyratne, Professor of Economics at the Colombo University, said there was little understanding in Sri Lanka about economic freedom or its effects with many people being taught to think that the controls were good.

“People know a lot about political freedoms, but not about economic freedoms,” Abeyratne said.
“Economic freedom affects all of us in our daily lives. Many of the controls from the 1970s still exist despite several rounds of liberalizations.”

“There are people who still say that Sri Lanka would be like Singapore if the controls of the 1970s still existed.”

He said there was time when some people marched on streets saying they were prepared to have tea without sugar. Abeyratne said all laws should apply equally to everyone, like a red light applies to all on the road regardless of the person.

Then economic freedoms will bring benefits and scams will reduce, he said.

If property was not protected, investors will also not come, he said.

There was a misconception that economic freedoms were only good for investors or foreigners, a seminar participant said. 

The seminar conducted in the Sinhalese language was the final event of the three-day Economic Freedom Summit organised by Advocata Institute and Fraser Institute of Canada, which compile a global index of economic freedoms. 

The event began with a plenary session and closed- door discussions with industry, academia and policymakers to develop steps to improve economic freedom and greater prosperity.

Investors and jobs
Special Assignments Minister Sarath Amunugama, who graced the seminar as the chief guest, said around the time of independence, there was a belief that a country would make the best use of resources and develop fast if there was central planning by the state.

Some development happened especially in heavy industries but later problems emerged. 
China was one of the first countries to recognize the problem and under the then Prime Minister Zhou Enlai and later Deng Xiaoping relaxed many controls.

“They realized that domestic resources were not enough to take the country forward,” Amunugama said.

“Investors are not charities. Immense freedoms have been given to foreign businesses to invest, to hire workers and also the freedom to take away profits to their home countries.

Now if you go to Shanghai across the river, you will see massive neon signs. They all advertise multinational brands.”

Vietnam, another socialist country, had achieved major gains by moving away from central planning and controls, he said.  

Vietnam started liberalizing through its Chính sách Đổi Mới (Renewal Policy) in 1984 though it took many years for investors to be convince, economic 
analysts say.

Amunugama said the concept of economic freedom was relative and it did not mean that there was no role for the state or regulation.

Rule of law
Fred McMahon, who manages the Fraser Institute Economic Freedom project, said the freedom of one person should be exercised without stepping on the freedoms of others.

“Individuals have economic freedom when property they acquire without the use of force, fraud or theft is protected from physical invasions by others,” he said.

“They are free to use, exchange or give their property as long as their actions do not violate the identical rights of others.”

In the Fraser Institute economic freedom index, rule of law is a key aspect. Rule of law, which treats everyone equally, will protect the weak from the strong and powerful. 

Philosophers have pointed out that those who take away the freedoms of others are usually those who are armed, which is the armed state and gangsters of all kind, who may steal and use arms.

Meanwhile, McMahon said Sri Lanka had improved its position in the Economic Freedom of the World Index to 94 out of 159 countries but more benefits will come to the people if the controls were relaxed.
Sri Lanka’s legal system had a rank of 73, but on sound money (how good the Central Bank is in providing low inflation money) it was 135. In free trade also Sri Lanka scored badly at 135 out 159.
“Sri Lanka cannot be a success story by trading with 20 million people. But Sri Lanka can with few billion people,” McMohan said.  

Our performance at 135th out of 159 nations on trade is not at all satisfactory, especially for a small island like Sri Lanka. 

There was a direct co-relation with economic freedom and prosperity he said.

The average income of the poorest 10 percent of the population of the quarter of countries with the most economic freedom was about US $ 10,000 a year, he said. But in the countries were least free the bottom 10 percent of people earned about US $ 1,000 a year.

Countries like Malaysia and Korea that scored very high on economic freedom, also had high living standards compared to India and Sri Lanka.

The poor in countries with greater economic freedoms had far higher incomes than in countries with lower levels of freedoms, McMahon said.

Political freedoms were generally higher in countries with greater economic freedoms, he said.
Samarajiva said political freedoms provided the space to fight for economic freedoms but it could also be robbed by a vocal minority if those who were hit by controls stayed silent without speaking out. 
(Advocata)